The New Politics of Trade: Lessons from TTIP

By Alasdair R. Young

The negotiation of international trade agreements has become the issue of the moment. With Brexit, a change in administration in the United States, a fragile economic recovery in the Eurozone and China facing a slowdown in its growth, nothing is more critical to the future global economy than the terms of trade between its largest economic blocs. The Transatlantic Trade and Investment Partnership (TTIP) is Europe's most controversial trade agreement ever. Aimed at reducing regulatory barriers between the United States and the EU, it was expected to be fairly straightforward given strong business support on both sides of the Atlantic. It has not been so. The negotiations have dragged on far longer than anticipated and now look set to fail altogether. Yet the process of its negotiation, the terms of the potential agreement and its sticking points provide valuable lessons for policy-makers and academics tasked to bring future trade deals and arrangements to successful conclusions.

Alasdair Young offers a penetrating analysis of the complexities of the TTIP negotiations and explores why they have proved so difficult to conclude, what motivates the different parties concerned and what implications there are for politics and policy. Young throws light on the limits of the transatlantic cooperation and the processes of globalization and teases out the implications for the UK in its post-Brexit trade negotiations and for other nations now facing a more protectionist stance from the United States.

• Language: English
• Publisher: Agenda Publishing
• Release date: Nov 30, 2017
• ISBN: 9781788210867

Alasdair R. Young

Alasdair R. Young is Professor of International Affairs and Co-Director of the Center for European and Transatlantic Studies at the Georgia Institute of Technology. His books include Parochial Global Europe: Twenty-First Century Trade Politics (with John Peterson) (2014).

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Comparative Political Economy

Series Editor: Erik Jones

A major new series exploring contemporary issues in comparative political economy. Pluralistic in approach, the books offer original, theoretically informed analyses of the interaction between politics and economics, and explore the implications for policy at the regional, national and supranational level.

Published

The New Politics of Trade

Alasdair R. Young

The New Politics of Trade

Lessons from TTIP

Alasdair R. Young

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© Alasdair R. Young 2017

This book is copyright under the Berne Convention.

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First published in 2017 by Agenda Publishing

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ISBN 978-1-911116-74-5 (hardcover)

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Contents

Acknowledgements

Foreword by Erik Jones

Abbreviations

1   Misplaced optimism

2   The transatlantic economy: Interpenetrated not integrated

3   TTIP’s ambition in context

4   Cooperation: Transatlantic business alliances

5   Contestation: The politicization of trade policy

6   Herding cats: Intra- and intergovernmental coordination

7   Brexit and Trump: Body blows to TTIP

8   Lessons from TTIP

References

Index

Acknowledgements

This book is part of a wider project that has been funded with support from the European Commission (Jean Monnet Chair, Award 2012-3121 and Jean Monnet Centre of Excellence, Award 2014-1842). It reflects only the views of the author, and the Commission cannot be held responsible for any use that may be made of the information contained herein. I am very grateful to Aarij Abbas, Simeon Bruce, Ha Young (Henry) Choi, Joshua Jacobs, Zoe Larrier, Meghan Lowther, Jon Schmid, Allison Stanford and Daniel Yoon for their excellent research assistance. I owe a particular debt to the government officials and interest groups’ representatives who, over the years, have generously taken time out of their busy schedules to discuss these matters with me.

Portions of this book, in different forms, have been presented at: the Biennial International Conference of the European Union Studies Association, Boston, MA, 5–7 March 2015; the US Department of State, 18 May 2015; Georgia Tech’s Scheller College of Business, 23 June 2015; the Transnational Relations and the Transatlantic Relationship Workshop at Georgetown University, 4–5 February 2016; the International Studies Association’s 57th Annual Convention in Atlanta, GA, 16–19 March 2016; the 23rd International Conference of Europeanists, Philadelphia, PA, 14–16 April 2016; the 21st Century Trade Politics: TTIP as a Test Case?, Jean Monnet Workshop at the Georgia Institute of Technology, 29–30 April 2016; the The Transatlantic Trade & Investment Partnership (TTIP): Prospects and Challenges for EU–US Economic Cooperation conference at Florida International University, 16–17 February 2017; and the European Union Studies Association 15th Biennial International Conference, Miami, FL, 4–6 May 2017. I am grateful to the many participants – particularly Na-Kyung (Haillie) Lee, Sophie Meunier, Abraham Newman, Mark Pollack, Mike Smith, Christilla Roederer-Rynning and Gabriel Siles-Brügge – for their comments on parts of this book. I also thank an anonymous reviewer for his/her close reading of, and constructive comments on, the manuscript. I am also very grateful to Erik Jones for encouraging me to write this book, to Alison Howson at Agenda for her expert guidance, and to both for their feedback on the manuscript. I claim sole ownership of any and all errors.

I am profoundly grateful to my family – Paige, Cameron and Scout – for their love and support.

ARY

Atlanta, GA

Foreword

Erik Jones

The Transatlantic Trade and Investment Partnership was intended to be the cornerstone for a new multilateral trading system. The agreement would lower costs for firms doing business on both sides of the Atlantic. It would raise employment related to the trade in goods and services in Europe and the United States. And it would promote a new pattern of regulatory cooperation that would leverage the common values shared by Americans and Europeans to create binding standards for manufactured products, service provision, labour relationships, investment protection and conservation of the environment. In short, it was a deal that had something for everyone and offered few incentives for opposition from those who would be part of the agreement. Non-participating countries such as China might complain about the necessity for dealing with a Euro-American condominium, and yet the principals on both sides of the transatlantic partnership had nothing to lose and everything to gain.

Paraphrasing the Scottish poet Robert Burns, the best laid plans of mice and men oft go astray. The Transatlantic Trade and Investment Partnership was not negotiated on one tank of gas, as US Trade Representative Michael Froman promised in July 2013. Instead, it languished in the shadows of the US-led Transpacific Partnership negotiations on the American side of the Atlantic, while confronting unexpected (and unexpectedly intense) opposition in Europe. Business leaders in large multinational corporations remained enthusiastic about the prospects for an agreement, and trade negotiators remained committed to fulfilling their brief. Nevertheless, the new partnership fell prey to a growing distrust of complex trade agreements, outright rejection of third-party arbitration, and a lingering sense that the dense web of trade and investment that makes up the global economy is not a good thing.

Events also conspired against the agreement. The June 2016 UK referendum vote to leave the European Union (EU) challenged fundamental assumptions about what a transatlantic partnership would mean. The US election of Donald Trump as 45th president the following November only deepened scepticism about the prospects for (and desirability of) agreement on both sides of the Atlantic. When the new Trump administration withdrew from the Transpacific Partnership, most observers took it as given that the Transatlantic Trade and Investment Partnership was dead. What started as a win–win agreement no longer looked to be worth the effort. Any new multilateral trading system would have to find other foundations. The only questions were who would pick up the pieces, and when.

Alasdair Young does a masterful job of both setting out and explaining this narrative. In this short book, he makes it easy to understand why the Transatlantic Trade and Investment Partnership started with such high expectations, and how things went in a different direction. His story is about the subtle challenges that emerge when efforts to promote regulatory cooperation are folded into a more traditional trade negotiation. It reveals the importance of differences in political institutions across the Atlantic. And it shows how political leaders were caught unprepared by the suddenness and intensity of opposition to globalization. The Transatlantic Trade and Investment Partnership was both the logical progression in economic integration between the world’s two largest and wealthiest economies and the victim of the kind of backlash that adaptation to modernity brings. The negotiations failed for the same reasons they came into being.

This story is important both to unlock the recent past and to prepare for a potentially tumultuous future. The United States and the EU have the luxury of living together without another complex and more comprehensive form of partnership. The ties of existing agreements for trade liberalization and for regulatory cooperation are already binding. The same is not the case for the United Kingdom, which is preparing to rebuild its relationships with the EU and the United States from scratch. The economic logic for having deep and comprehensive agreements between Great Britain and its Atlantic partners is compelling. The politics is much more complicated. Young’s analysis of the failure of negotiations across the Atlantic offers important insight into the challenges that British politicians and negotiators are likely to face. The Transatlantic Trade and Investment Partnership may have ended in failure, but hopefully the British government and its Atlantic partners can learn from those mistakes.

This volume is the first in a new series that brings together economic and political analysis in a form that is both accessible and policy-relevant. The goal of the book and the series is to engage with contemporary issues in order to extract lessons that will be of use in the near future. It is also to provide a lasting analysis of the challenges that policy-makers have faced and are confronting. We hope these volumes will have an immediate impact, but we want to ensure that they set a high standard for scholarship. We are immensely grateful to Alasdair for taking on this challenge. We believe he has more than met our expectations. We hope you will agree.

Abbreviations

1

Misplaced optimism

The Transatlantic Trade and Investment Partnership (TTIP) negotiations aspired to integrate the world’s two largest economies – the United States and the European Union (EU) – and bridge the world’s most valuable and complex economic relationship. Their emphasis on mitigating the adverse trade effects of domestic policies made them also substantively the most ambitious trade negotiations the world has yet seen.

When the negotiations were launched in June 2013, expectations were high for the swift conclusion of an ambitious agreement. United States Trade Representative (USTR) Michael Froman famously declared that he expected the negotiation to be concluded on one tank of gas. European officials suggested that a deal by the end of 2014 was doable.¹

The case for the agreement was strong. Officials on both sides of the Atlantic promoted it as a means of spurring on economic recovery in the wake of the global financial crisis; of responding to the rise of China, both by setting standards that would de facto become global standards and by boosting the competitiveness of US and European firms; and, subsequently, of bolstering the transatlantic alliance in the face of Russian aggression in Ukraine (De Gucht 2015: xvii; Froman 2014: 114–15). Despite these motivations, the negotiations dragged, and no end was in sight even before the twin blows of the UK’s vote to leave the EU and Donald Trump’s election as president of the United States. As I argue in Chapter 7, these events spelled the end of TTIP, at least in its current form. This short book explains why optimism was initially so high, and why it turned out to be misplaced. It also highlights the implications for future trade negotiations.

The initial optimism about the prospects of TTIP reflected the broad support for the agreement among transnational business interests and high-level political support, particularly in Europe. Not only did firms on both sides of the Atlantic favour an agreement, in many cases they agreed on the terms they wanted to see. There was thus an unprecedented degree of cooperation among business interests behind the agreement. In addition, labour unions were not particularly opposed to the deal. Thus, to the trade officials in charge of the negotiations, the political winds looked remarkably favourable and set fair for a swift and ambitious agreement.

The negotiations, however, ran into two distinct political headwinds. One was an unprecedented level of engagement by non-traditional trade actors – consumer and environmental groups and even citizens. This new pattern of contestation was particularly pronounced in Europe. Opposition was fuelled by concerns that TTIP would force the parties to weaken rules that delivered valued social objectives, such as product safety and environmental protection, and constrain their ability to adopt such rules in the future. The opposition to TTIP, therefore, was a particular manifestation of the broader anti-globalization sentiments evident in the 2016 US presidential election and the UK’s vote to leave the EU.

The other headwind, which was stronger in the US, was the challenge of coordination. Addressing the adverse trade effects of domestic rules, as TTIP aspired to do, requires the engagement and coordination of those government officials, at all levels, who make the rules. In the context of TTIP, this meant regulators and subcentral governments: US states, EU member states and their own internal substate governments. Many of these actors have priorities other than trade liberalization and have proved loath to compromise on them in order to achieve that end. In different ways, these headwinds greatly constrained the capacity of the US and the EU to make the difficult concessions necessary to deliver an ambitious agreement, even before Brexit and Trump’s election.

Although the TTIP negotiations as such are almost certainly over, they remain highly relevant. The issues that they sought to address, and the politics associated with them, will not go away and will remain relevant for future trade negotiations, not least those impending between the UK and the EU. Transatlantic regulatory cooperation remains alive and well, with US and EU regulators concluding agreements on pharmaceuticals, insurance and citrus fruit, even after the core negotiations were frozen. The European Commission (2015d: 3) has also undertaken to increase the transparency of all future trade negotiations in the wake of opposition to TTIP. In addition, the EU has incorporated the investment court system (ICS) for dealing with complaints from foreign investors, which it proposed to address public opposition to TTIP, into its agreements with Canada and Vietnam and it intends to multilateralize that system (Commission 2017b: 15). Whatever the fate of the TTIP negotiations, therefore, they have had enduring implications.

The rest of this chapter lays the groundwork for the volume. It puts the TTIP negotiations in context with respect to other such trade agreements, before briefly introducing the key trade policy-making actors and institutions on both sides of the Atlantic. It also addresses why the negotiations were launched when they were.

TTIP: First among preferential trade agreements

The aim of the TTIP negotiations is to conclude a reciprocal agreement between the EU and the US that would improve how they treat each other’s firms and products. As such, it